1. Field of the Invention
The present invention relates to the field of automated systems for comparing and reconciling accounting records and more particularly to reconciling customer account information kept by a customer of a bank and corresponding account information kept by a bank.
2. Reconciliation Process Generally
Reconciliation is a process for comparing a bank statement prepared by a bank with corresponding customer information kept by a customer and for explaining the reasons for any differences resulting from the comparison. Typically, the final balance according to the bank statement is compared with the final balance according to the customer's information for a particular accounting period. Each individual transaction affecting the balance is compared.
3. Prior Art Generally
Many bank accounts are reconciled manually by bank customers. A bank customer visually compares a printed bank statement and corresponding customer accounting information. The visual process tends to be time-consuming, tedious, and error-prone.
To reconcile an account, the customer or other reconcile typically sorts the records into numerical order and arranges the cancelled checks and other bank statement records together with the customer's own accounting information so that they are all in view. For each transaction record on the bank statement, the customer visually scans the customer's own accounting information to identify a matching transaction record. Typically transactions are visually matched based on amount, serial number if any, and date range. If a bank transaction is paired with an identical customer transaction, the customer marks the paired records and continues to the next record until all records have been examined. If a close but not perfect match is found, the customer must determine the reason for the discrepancy. Then either the bank or the customer must correct any erroneous or missing information. After all records are matched and discrepancy noted, the reconciler totals (1) the amounts of checks listed in the customer records that have not yet cleared the bank, (2) the customer deposits not entered by the bank, and (3) bank transactions that the customer has not entered. The customer then calculates the correct ending balance as follows: True ending balance equals bank ending balance plus outstanding deposits or credits minus outstanding checks or debits. If the calculated ending balance equals the ending balance in the customer's accounting information, reconciliation is complete. If the balances do not equal, the reconciler must search for discrepancies or errors and correct them until the account is reconciled.
Many banks offer a comparison service to help reconcile customers' accounts. For such services, each participating customer provides a copy of the customer's accounting information to the bank, usually in electronic form such as on disk, on tape or by computer transmission in a format specified by the bank. The bank enters the customer accounting information into the bank's computer. The bank's computer also contains the bank statement information for the customer. The bank's computer compares the bank and customer accounting information to prepare a report for the customer identifying discrepancies. Typically, the bank makes no effort to reconcile any discrepancies.
Some banks provide customers with a bank statement in electronic form. Typically, a customer electronically enters the data from the electronic bank statement into the customer s computer and the customer's computer compares the bank data with the customer's data, but this method offers no assistance in resolving discrepancies.
For bank customers, the number of records processed per month or other accounting period can vary greatly depending on the nature of the customer. For personal accounts, the number of checks, withdrawals, and other records on a monthly statement may range from a few to several hundred. For customer accounts of businesses, the number of records per month may be in the thousands. Usually, a high percentage of the records for each transaction period are easily matched and therefore reconcilable with little difficulty. However, differences between records from a bank statement list of records and a customer's corresponding list of records for the same accounting period can be 2% or higher of the total number of records.
For a customer's account which has an average of four thousand records per month and a 2% difference rate, eighty non-identical records must be reconciled because of some discrepancy between the bank listing and the customer listing. At the time of reconciliation, a customer will normally have entered records into the customers accounting information for transactions in the next accounting period so that the customer's list of records is usually larger than the bank's list of records and this difference makes the reconciliation process more difficult.
In general, for checking accounts, the elements for each record which are compared include the date of the check, the number of the check, and the amount of the check. These elements are selected for comparison because the bank conventionally supplies the information to a customer with the customer's list of records with the monthly bank statement. However, many transactions in addition to checks occur in a checking account and require attention in order to reconcile the bank list with the customer list of records.
For example, bank service charges of many different types are entered by the bank into the bank statement and often this information is not added to the customer's list of records. Other transactions which appear on records on a bank list include credits, reversal of charges, and insufficient funds transactions. These bank records often lead to discrepancies between a bank listing of records and a corresponding customer listing of records.
Other sources of discrepancies between the bank listing and the customer listing are errors in records that are introduced either by the bank or by the customer. For example, one common error is the transposition of digits in either the date element or in the amount element. Another common type of error is the omission of a check number. Also, certain records in a bank listing have no record number. For example, bank service charges or withdrawals from automatic tellers ATMs) have no "check" number.
The difficulty of reconciling records having discrepancies due to errors can become complex and is a function of the number of records having discrepancies, the number of records in one listing having no corresponding records in the other listing, and in the nature of errors causing discrepancies. For example, if a business tends to write a large number of checks for similar dollar amounts on similar dates, it is difficult to correlate visually a record in a bank list with a similar record (particularly when a difference due to an error or otherwise exists) in the customer list. Such a correlation is further compounded if transactions of like or similar dollar amounts omit a check number for reasons of error or otherwise.
The amount of time required to visually correlate and match erroneous information can be excessive. Even when computers are employed to do a comparison of records which are easily matched because the elements in the records are identical, the reconciliation of the unmatched (and sometimes erroneous) records can be highly time consuming.
The problem of reconciliation extends to other types of accounts, also. For example, reconciliation of a list of records from a credit card statement provided by a credit card issuer with a customer's own list of credit card records is often more difficult than checking account reconciliation. The increased difficulty occurs because credit card statements usually only identify the amount and date of the transaction without the equivalent of a transaction number (such as the check number usually present on checks in a checking account). Because there are fewer elements to use in the comparison of information, credit card account reconciliation proves quite difficult when attempted visually.
While the above and other methods compare lists of accounting records to identify discrepancies, none of those methods adequately assist in reconciliating discrepancies.
In accordance with the above background of the invention, there is a need for improved methods and computer software for use with computers in reconciling periodic listings of accounting records.